Please to calm down about the minimum wage
As we all know, President O has called for raising the Federal minimum wage to $9.00 an hour. This has caused many of my friends to get fairly upset and argue that this is a bad policy that will raise unemployment.
(1) In truth, we don't really know what the minimum wage does to unemployment. Studies are mixed at best on that issue. It's just not that easy to isolate causal effects here.
(2) We just don't live in a principles of micro world where markets are perfectly competitive and firms have no market power / economic profits, so any wage above an individual's marginal product is impossible to sustain. Besides the difficulty of identification, this is probably the main reason why it's so hard to find employment effects of minimum wage changes.
(3) A better reason to object to the minimum wage increase is that there are much more efficient ways to help the working poor. It doesn't seem to be well appreciated, but a substantial fraction of workers earning the minimum wage do NOT live in poor households. They are teenagers living at home or second workers in a household. If we wish to aid the working poor, increasing the earned income tax credit (EITC) is a much more effective approach.
(4) It is also good to remember that there are still a lot of jobs out there where the minimum wage does not apply (some classes of young worker, workers who earn tips).
(5) This is a bit of a stretch but if the higher minimum wage did price someone out of the labor market, perhaps it would propel them into upgrading their human capital, with a GED or some vocational training or community college.
Finally, I'd like to ask my conservative friends to stop making the "if a higher minimum wage is good why stop at $9, why not make it $90 and everyone would be rich" argument.
It's just silly.
Obviously, we could find a minimum wage that would have serious employment effects. But it's not in the $9.00 neighborhood, and no one is proposing even a doubling of the current minimum wage.
If Reid & Pelosi (in 2014 after the Dems take back the House) propose a $20 minimum wage, then I'll join y'all on the ramparts.
Otherwise, let's consider giving it a rest. There are far far far worse policies that are actually in effect which deserve our attention and effort.